Polaris trims GDP forecast

As the economic downturn at home and abroad deepens, another research body yesterday trimmed its forecast for the nation’s GDP growth next year, warning of negative growth.

Polaris Economic Institute (寶華綜合經濟研究院) unveiled its GDP growth projection for next year and put the rate at 0.52 percent, the lowest estimate by domestic research bodies, saying it would be driven by government spending.

“Outbound trade is worse than expected and has a slim chance of curbing negative growth in the first half of next year, leaving public investment to expand domestic demand and sustain the economy,” Liang Kuo-yuan (梁國源), president of the Taipei-based institute, told a media briefing yesterday morning.

But Liang, whose agency projected consumer prices would fall 0.22 percent next year, warned that the government leaves much to be desired in implementing spending measures so far.

Investments by the government and national enterprises contracted 6.44 percent and 9.94 percent in the second half of this year, respectively, far behind the goals of expanding by 12.44 percent and 0.55 percent each, the report showed. Public sectors dragged down the nation’s GDP growth by 0.3 percentage points, the report said.

“The nation may post negative growth next year as in 2001 if the government fails to execute various stimulus measures effectively,” Liang said.

The institute lowered its GDP growth forecast to 1.71 percent for this year, from 4.1 percent estimated in September, with the economy expected to fall 2.35 percent in the final quarter, the report showed.

Exports, which carry more than 60 percent of the weight of the economy, are forecast to contract 4.75 percent next year with a minor recovery of 1.21 percent expected in the fourth quarter, the report said.

Liang said the NT dollar will continue to weaken against the greenback.

The currency is predicted to trade at an average of NT$34.3 versus its US counterpart.

While projecting an annual decline in consumer prices, the economist said it was too early to worry about deflation.

“It will take quite a while for an economy to slip into deflation,” Liang said. “A couple of quarters of price declines should not be taken as deflation.”

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